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Given the long-term growth of the U.S. population, there’s no way home sales can remain historically low for much longer, National Association of REALTORS® Chief Economist Lawrence Yun said Tuesday.
At the Residential Economic Issues & Trends Forum during the REALTORS® Legislative Meetings in Washington, D.C., Yun pointed out that there are 70 million more Americans today than in 1995. Housing needs are only increasing, and that won’t change because of complicated economic factors, he said.
Although home sales are at a 30-year low as buyers face higher borrowing costs and stubbornly low inventory, housing options on the market are beginning to increase. To get markets moving, he said, NAR has been advocating for a variety of measures in Congress, such as giving mom-and-pop investors an incentive to sell to first-time buyers and increasing the capital gains exemption on the sale of a primary residence.
And while the Federal Reserve has delayed rate cuts that were expected to start this spring, Yun said he anticipates as many as six to eight rate cuts by the end of 2025, possibly beginning as early as September. “If the Fed were to normalize its policy, then maybe mortgage rates could move lower. So, not only are we getting potentially more inventory, but we’ll also get more buyers as rates comes down,” he added.
“Over the next 10 years, eight of those years will likely see increases [in home sales].”
In addition, consumers may be adjusting to the feeling of “permanently high inflation” and looking for safe financial bets, Yun said. That will drive more homebuying decisions as consumers recognize real estate as an appreciating asset that has historically provided a good hedge against inflation. And with 90% of home buyers and seller saying would likely or probably use or recommend their real estate agent again, according to NAR research, that bodes well for business.
“The referral business is key,” Yun said. “Your past clients are super happy in terms of their wealth gains. Seven percent mortgage rates are high compared to a couple of years ago, but you have to buy a home in order to build wealth. Have Americans lost the dream of homeownership? I don’t think so.”
